Overseas, chargebacks may look very similar to traditional chargebacks, but there is a relevant difference: instead of contacting the merchant to obtain a refund, the buyer asks his card-issuing bank to apply the chargeback, thus forcibly removing the money from the merchant's account.
An investigation is then carried out and, if the bank deems the cardholder's request to be valid, the funds are removed from the merchant's account and returned to the buyer; the buyer, on the other hand, is in no way obliged to return what was purchased.
The merchant has no say in this. As consumer protection, the chargeback naturally leans toward the security of the cardholder, in several ways:
Chargebacks are designed to make customers feel secure.
The risk of a forced reversal of funds keeps merchants focused on providing quality customer service.
Chargebacks also serve as a deterrent to businesses that might be tempted to sell poor quality products or services.
The buyer will claim that the products or services were not as described, setting the stage for a claim situation.
The threat of chargebacks helps businesses remain transparent.
Customers cannot be expected to pay for something that was never delivered, charges that should not have been made in the first place, or returns that were never issued.
Chargebacks help protect cardholders from the effects of criminal fraud.
In a world where data breaches exist, many cardholders are not even surprised when they learn that unauthorized transactions have been made on their account. The ability to file a chargeback on fraudulent credit card transactions helps innocent victims recover their money.